On this blog, we’ve discussed before how traditional commercial real estate (CRE) modelling activities demand an enormous amount of skilled time to execute. On average, the technical contraction makes up only half of the effort. The other half is design and presentation. We’ve also discussed how much of this time expenditure can be eliminated through automation, the cloud, and software features like the easy-to-use graphical interfaces pioneered by CRM tools.
While these features can help firms generate modeling results faster and easier, the results may not achieve their full value if they can’t be communicated effectively–in some cases they could be misunderstood or ignored. CRE deals are complicated, and traditional tools are often cumbersome. As a result, communicating what a model actually means can be tough, and more than a few good deals have died due to ineffective communication.
Part of the struggle is that CRE deals usually involve a wide range of stakeholders from highly trained technical personnel like underwriters to more general audiences like corporate decision-makers, clients, and investors, all looking for a different level of detail and focus. To get the right information across in an easily consumable way to this wide range of stakeholders, firms must have access to tools that allow them to generate visualizations of financial data tailored to specific audiences, quickly and easily.
Making everyone happy
For most firms today using traditional modelling techniques built on Excel or enterprise software, creating charts and graphs to represent financial models can add hours of work to a model. Software like Excel offers extremely powerful features for generating graphs and charts, but the process is very manual and time consuming. The level of granularity offered by spreadsheet software often makes these tools impractical when you need to generate graphics to illustrate an executive summary, an investor outlook, or information for clients and partners, all on tight deadlines–and on top of the many hours needed to run and audit the model in the first place.
Self-service analytics solutions should, in theory, make this process much easier, but these tools are often somewhat difficulty to master as well. Add to this the fact that it’s not always the case that people who are brilliant analysts are equally brilliant communicators, and you consequently have many firms hiring special teams of designers who are dedicated to churning out graphics representations of complicated models.
In practice, the difficulty of generating visuals tailored to specific audiences means that the significance behind a model can get lost in translation for one or more key audience. In addition, satisfying everyone’s needs for the information that will help them make the right decision is often an iterative process. You’re not only generating this array of visuals once, you might be generating them in multiple rounds as adjustments are made to the model and outputs change, a process that be error-prone when done manually.
Making everyone happy and delivering the right information requires yet another rethinking of how traditional modeling is done, and another look in to what ideas can be borrowed from other industries.
Putting complexity under the hood
The time consuming and cumbersome activities of generating visuals in Excel and other traditional modelling tools can easily be replaced with sleeker and more effective methods when CRE modelling data is unified and managed through a single system that puts an easy-to-use, feature-rich interface on top of the complexities of data.
In fact, this is where CRM-style tools and user interfaces can really shine. With complexity sequestered under the hood, it’s much easier to build tools that make generating visuals easy. And when it’s easy to generate charts and graphs, it’s easier to focus on generating the right charts and graphs for every stakeholder, at every stage of the deal.